KKR & Co. (KKR) 8-K/ACompletion of Acquisition or Disposition of Assets

UNAUDITED COMBINED PRO FORMA FINANCIAL INFORMATION

On February 1, 2021, KKR & Co. Inc. (together with its subsidiaries, “KKR”) completed the acquisition of Global Atlantic Financial Group Limited (“Global Atlantic”) by Magnolia Parent LLC (“Parent”), a KKR subsidiary, as contemplated by the Agreement and Plan of Merger, dated July 7, 2020 (as amended, the “Merger Agreement”), by and among Global Atlantic, Global Atlantic Financial Life Limited (“GA Life”), Parent, Magnolia Merger Sub Limited (“Merger Sub”), LAMC LP, and Goldman Sachs & Co. LLC, solely in its capacity as the Equity Representative. The total purchase price for the transaction was approximately $4,681 million, subject to certain post-closing purchase price adjustments as provided in the Merger Agreement.

At the closing of the transaction (the “Closing”), Merger Sub (a direct wholly-owned subsidiary of Parent) merged with and into Global Atlantic (the “GA Merger”), with Global Atlantic continuing as the surviving entity and as a direct wholly-owned subsidiary of Parent, and immediately thereafter, GA Life merged with and into Global Atlantic (the “Life Merger” and, together with the GA Merger, the “Mergers” or the “Acquisition”).

The following unaudited pro forma combined historical consolidated financial information of KKR and Global Atlantic is presented to illustrate the estimated effects of the Acquisition described below (collectively, “Adjustments” or “Transaction Accounting Adjustments”).

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines the historical consolidated statement of operations of KKR and consolidated statement of income of Global Atlantic, after giving effect to the Acquisition as if it had occurred on January 1, 2020. The unaudited pro forma condensed combined statement of financial condition as of December 31, 2020 combines the historical consolidated statement of financial condition of KKR and consolidated balance sheet of Global Atlantic, after giving effect to the Acquisition as if it had occurred on December 31, 2020. We refer to these unaudited pro forma condensed combined statement of operations and unaudited pro forma condensed combined statement of financial condition as the “pro forma financial information.”

The pro forma financial information should be read in conjunction with the accompanying notes. In addition, the pro forma financial information is derived from and should be read in conjunction with the following historical consolidated financial statements and accompanying notes of KKR and Global Atlantic:

The pro forma financial information has been prepared using the acquisition method of accounting under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), with KKR being the accounting acquirer

in the Acquisition. The pro forma Adjustments are preliminary, based upon available information and prepared solely for the purpose of this pro forma financial information. These Adjustments are based on preliminary estimates and will be different from the adjustments based on final acquisition accounting when it is completed, and these differences could be material.

Under the Merger Agreement, Magnolia Parent agreed to pay existing shareholders of Global Atlantic an amount in cash equal to 1.0x U.S. GAAP Shareholders' Equity of Global Atlantic, excluding Accumulated Other Comprehensive Income (“GA Book Value”) and subject to certain other adjustments, as of the date of closing. The amount of consideration payable by KKR was reduced by the amount of any equity roll-over by certain existing shareholders of Global Atlantic who elected to roll over their equity in Global Atlantic at closing (“Rollover Investors”). In addition, KKR syndicated equity interests in Global Atlantic to minority co-investors (“Co-Investors”), which also had the effect of reducing the amount of consideration payable by KKR’s balance sheet at closing.

The pro forma financial information gives effect to the following sources of funds to satisfy the estimated $4,681 million of consideration (based on GA Book Value as of February 1, 2021) paid by KKR to complete the Acquisition:

The pro forma financial information reflects pro forma adjustments management believes are necessary to present fairly KKR’s pro forma financial position and results of operations following the closing of the Acquisition as of and for the periods indicated. The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, directly attributable to the Acquisition, and reflective of adjustments necessary to reflect KKR's financial condition and results of operations as if KKR completed the Acquisition on January 1, 2020.

Note 1 - Description of Transaction

On February 1, 2021, KKR & Co. Inc. (together with its subsidiaries, “KKR”) completed the acquisition of Global Atlantic Financial Group Limited (“Global Atlantic”) by Magnolia Parent LLC (“Parent”), a KKR subsidiary, as contemplated by the Agreement and Plan of Merger, dated July 7, 2020 (as amended, the “Merger Agreement”), by and among Global Atlantic, Global Atlantic Financial Life Limited (“GA Life”), Parent, Magnolia Merger Sub Limited (“Merger Sub”), LAMC LP, and Goldman Sachs & Co. LLC, solely in its capacity as the Equity Representative. The total purchase price for the transaction was approximately $4,681 million, subject to certain post-closing purchase price adjustments as provided in the Merger Agreement.

At the closing of the transaction (the “Closing”), Merger Sub (a direct wholly-owned subsidiary of Parent) merged with and into Global Atlantic (the “GA Merger”), with Global Atlantic continuing as the surviving entity and as a direct wholly-owned subsidiary of Parent, and immediately thereafter, GA Life merged with and into Global Atlantic (the “Life Merger” and, together with the GA Merger, the “Mergers”).

In connection with the Closing, Parent changed its name to The Global Atlantic Financial Group LLC (“TGAFG”) and became the new holding company of Global Atlantic’s business. Also, in connection with the Closing, certain previous shareholders of Global Atlantic elected to participate in an equity roll-over to become shareholders of TGAFG, and new co-investors agreed to fund in cash a portion of the purchase price to become shareholders of TGAFG. Following these roll-overs and co-investments, KKR owns approximately 61.1% of TGAFG as of the Closing.

Note 2 - Basis of Presentation

The pro forma financial information was prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, "Business Combinations" ("ASC 805") and are derived from the audited historical financial statements of KKR and Global Atlantic.

The pro forma financial information has been prepared by KKR for illustrative and informational purposes only in accordance with Article 11. The pro forma financial information is not necessarily indicative of what KKR’s consolidated statement of operations or consolidated statement of financial condition would have been had the Acquisition and other Adjustments been completed as of the dates indicated or will be for any future periods. The pro forma financial information do not purport to project the future financial position or results of operations of KKR following the completion of the Acquisition. The pro forma financial information does not include adjustments to reflect any potential revenue synergies or cost savings that may be achievable in connection with the Acquisition. The pro forma financial information reflects pro forma adjustments management believes are necessary to present fairly KKR's pro forma financial position and results of operations following the closing of the Acquisition as of and for the periods indicated. The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, directly attributable to the Acquisition, and reflective of adjustments necessary to reflect KKR's financial condition and results of operations as if KKR completed the Acquisition on January 1, 2020.

The acquisition method of accounting uses the fair value concepts defined in ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"). Fair value is defined in ASC 820 as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Fair value measurements can be highly subjective, and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

The allocation of the consideration is preliminary and is pending finalization of various estimates, inputs and analyses. Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the Acquisition, the actual amounts eventually recorded for

the acquisition method of accounting, including the identifiable intangibles and goodwill, may differ materially from the information presented.

The initial allocation of the preliminary consideration in this pro forma financial information is based upon the Book Value (as defined in the Merger Agreement) of Global Atlantic as of February 1, 2021. Given that the purchase price is subject to certain post-closing purchase price adjustments as provided in the Merger Agreement, the final transaction consideration to be paid by KKR assumed for the purpose of this pro forma financial information may not reflect the ultimate purchase price that KKR will have to pay in the Acquisition.

At this preliminary stage, the estimated identifiable finite lived intangible assets include value of distribution network acquired ("VODA") and Global Atlantic’s trade name. The estimated identifiable indefinite lived intangible asset relates to state insurance licenses acquired, which will not be amortized but will be subject to periodic impairment testing. In addition, total policyholder liabilities represent the estimated fair value of Global Atlantic's contractholder funds, future policy benefits and liability for policy and contract claims.

VODA, VOBA and the other identifiable finite lived intangible assets are amortized over their estimated useful lives.

Goodwill represents the excess of the estimated purchase price over the estimated fair value of Global Atlantic’s assets and liabilities, including the fair value of the estimated identifiable finite and indefinite lived intangible assets and liabilities described above. Goodwill will not be amortized, but will be subject to periodic impairment testing.

The calculation of goodwill and other identifiable intangible assets could be materially impacted by changing fair value measurements. Under ASC 805, acquisition-related transaction costs are not included as a component of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. Total transaction related costs in connection with the acquisition are estimated to be approximately $20 million and were already included in the consolidated financial statements for the year ended December 31, 2020.

Further, the pro forma financial information does not reflect the following items:

The presentations in the pro forma financial information reflect the significant industry diversification of KKR and Global Atlantic. Global Atlantic operates an insurance business and KKR operates an alternative asset management business, each of which possess distinct characteristics. As a result, KKR developed a two-tiered approach for the pro forma financial information presentations. KKR believes that these

presentations provide a more meaningful and informative view of the pro forma combined financial position and results of operations than traditional aggregate presentations. KKR believes that reporting Global Atlantic’s insurance operations separately is appropriate given, among other factors, the relative significance of Global Atlantic’s policyholder liabilities, which are not guaranteed by KKR. Were more traditional presentations used, KKR would eliminate or combine several identical or similar captions, which would condense the presentations, but would reduce transparency. KKR also believes that traditional presentations would result in no new line items presented compared to the two-tier presentations included in the pro forma financial information.

Global Atlantic historical amounts have been converted from millions to thousands to be in line with KKR’s historical presentation. As a result of displaying amounts in thousands rather than millions for Global Atlantic, rounding differences may exist in the pro forma financial information.

Note 3 - Reclassifications and Conforming Accounting Policies

At this time, KKR is not aware of any material differences in accounting policies and financial statement classifications that would have a material impact on the pro forma financial information with the exception of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"). Since Global Atlantic is not an SEC registrant, Global Atlantic’s adoption date for CECL would have been January 1, 2023. For purposes of the pro forma financial information, we have assumed that Global Atlantic’s adoption of CECL occurred on January 1, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 reflects all expected credit losses for financial assets held at December 31, 2020 based on historical experience, current conditions, reasonable and supportable forecasts.

KKR is still in the process of performing a full review of Global Atlantic's accounting policies to determine if there are any additional material differences that require modification or reclassification of Global Atlantic's revenues, expenses, assets or liabilities to conform to KKR's accounting policies and classifications. As a result of that review, KKR may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the pro forma financial information.

For purposes of the pro forma financial information, Global Atlantic’s investments have been presented as an aggregated amount on the unaudited pro forma condensed combined statement of financial condition.

Note 4 - Consideration and Purchase Price

The purchase price for the transaction is $4,681 million and is subject to post-closing adjustments, which are not expected to be finalized until June 2021 and are limited to a maximum amount of $150 million per the terms of the Merger Agreement.

Under the Merger Agreement, KKR agreed to pay existing shareholders of Global Atlantic an amount in cash equal to 1.0x U.S. GAAP Shareholders’ Equity of Global Atlantic, excluding Accumulated Other Comprehensive Income and subject to certain other purchase price adjustments (“GA Book Value,” determined as $4,681 million as of February 1, 2021 for purposes of the purchase price determination). The amount of consideration payable by KKR was reduced by the amount of any equity roll-over by certain existing shareholders of Global Atlantic who elected to roll over their equity in Global Atlantic at closing (“Rollover Investors”). In addition, KKR syndicated equity interests in Global Atlantic to minority co-investors (“Co-Investors”), which also had the effect of reducing the amount of consideration payable by KKR’s balance sheet at closing. The purchase price is as follows (in millions):

The below describes the estimated sources of funding presented in the table above:

Note 5 – Preliminary Fair Value Estimate of Assets to be Acquired and Liabilities to be Assumed

The table below represents an initial allocation of the preliminary consideration to Global Atlantic's tangible and intangible assets to be acquired and liabilities to be assumed based on KKR’s preliminary estimate of their respective fair values as of December 31, 2020:

Upon the completion of the acquisition date valuation procedures, the estimated fair value of the assets and liabilities will be updated, including the estimated fair value and useful lives of the identifiable intangible assets and allocation of the excess purchase price to goodwill. The calculation of goodwill and other identified intangible assets could be materially impacted by changing fair value measurements.

Note 6 – Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statement of Financial Condition

Explanation of the adjustments to the unaudited pro forma condensed combined statement of financial condition are as follows:

Note 7 - Transaction Accounting Adjustments to Pro Forma Statement of Operations

Explanations of the adjustments to the unaudited pro forma condensed combined statement of operations are as follows:

Subsequent to the Acquisition, the expected amortization expense (benefit) relating to the preliminary fair value of the acquired finite lived intangible assets for the five years following the Acquisition is reflected in the table below: